Panasonic to cut 15,000 jobs

February 4, 2009 7:27:36 AM PST
Panasonic Corp., sinking into its first annual loss in six years, said Wednesday it was slashing about 15,000 jobs and shuttering 27 plants worldwide, joining a string of Japanese companies making deep cuts as they cope with the global slowdown.

Plunging consumer demand, lower gadget prices and the soaring yen, which erodes overseas income, are battering Panasonic, the the world's largest maker of plasma display TVs. It racked up a 63.1 billion yen ($709 million) net loss for the fiscal third quarter compared to a 115.2 billion yen profit the same quarter the previous year.

The Osaka-based manufacturer of cell phones, batteries and camcorders also slashed its forecast for the fiscal year through March to a net loss of 380 billion yen ($4.2 billion), its first annual net loss in six years.

The last time Panasonic reported an annual loss was for the fiscal year ended March 2002, when a global electronics slump and massive restructuring costs contributed to 431 billion yen in red ink.

Since then, the company has been shedding money-losing businesses and focusing on key products such as plasma display TVs to turn itself around.

But the recovery couldn't hold up against the global slowdown set off by the U.S. financial crisis. Sales slid in a wide range of products, including flat-panel TVs, DVD recorders, microwaves, lamps and semiconductors, it said.

The planned job cuts at Panasonic - half of which will come in Japan - will come by the end of March 2010, and amount to about 5 percent of its 300,000-strong global work force.

Panasonic also will shutter 14 overseas plants and 13 plants in Japan by the end of March to adjust production and cut costs. The company has 230 production sites around the world but declined to give a regional breakdown.

"The company's business conditions have worsened particularly since last October, due mainly to the rapid appreciation of the yen, sluggish consumer spending worldwide and ever intensified price competition," it said in a statement.

Panasonic's decision to reshape its operations and speed up job cuts was positive, resulting in 300 billion yen in cost savings for the fiscal year through March 2010, said Koya Tabata, an analyst with Credit Suisse in Tokyo.

He also commended the company's relatively quick efforts to adjust inventory and reduce investments to boost profitability in coming months.

"But risks remain," Tabata said. "Panasonic is still expecting a serious sales decline to continue."

Sales for the October-December period dropped 20 percent to 1.880 trillion yen from 2.345 trillion, with overseas sales decreasing 29 percent, and Japanese sales down 10 percent.

The company, formerly named Matsushita Electric Industrial Co. after its founder Konosuke Matsushita, a pioneer in Japanese manufacturing, also lowered its sales forecast for the fiscal year ending March 31, to 7.75 trillion yen from an earlier 8.5 trillion yen.

Panasonic will delay by a half year starting production at two Japan plants - one for plasma panel TVs to July 2010, and another for liquid crystal display TVs until January 2010, in response to slipping demand for flat-panel TVs, it said.

The latest restructuring measures will cost an additional 190 billion yen on top of the 155 billion yen Panasonic has already announced for the fiscal year through March.

Panasonic is just the latest among Japan's big-name companies to announce massive job cuts and forecast losses in coming months.

Rival Japanese manufacturer Sony Corp. is forecasting a 150 billion yen net loss for the fiscal year through March. The last and only time Sony reported a loss - the fiscal year ending March 1995 - the red ink came from one-time losses in its movie division, marred by box office flops and lax cost controls.

Sony is cutting 8,000 of its 185,000 jobs around the world, as well as an additional 8,000 temporary jobs not included in the global tally. It is closing five or six plants, about 10 percent of its 57 factories.

Hitachi Ltd., NEC Corp. and Toshiba Corp. are also all forecasting big losses for the fiscal year.

Panasonic shares rose 1 percent to 1,092 yen. Earnings were announced after trading ended.

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